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Keynote address I: Impulse stochastic control and composite Markov processes

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1 Author(s)
Cao, Xi-Ren ; Shanghai Jiaotong University, Hong Kong University of Science and Technology

Motivated by the portfolio management problem, we propose a composite model for Markov processes. The state space of a composite Markov process consists of two parts, J and J in the Euclidean space Rn. When the process is in, it evolves like a continuous-time Levy process; and once the process enters J, it makes a jump (with a finite size) instantly according to a transition function like a direct-time Markov chain. The composite Markov process provides a new model for the impulse stochastic control problem, with the instant jumps in J modeling the impulse control feature (e.g., selling or buying stocks in the portfolio management problem). With this model, we show that an optimal policy can be obtained by a direct comparison of the performance of any two policies.

Published in:

Computer Science & Education (ICCSE), 2011 6th International Conference on

Date of Conference:

3-5 Aug. 2011